Lenders allege Byju's hid $533 mn in obscure hedge fund

Lenders have alleged that Byju's hid $533 million in an obscure three-year-old hedge fund to avoid it being seized to make up for a loan default, but the ed-tech titan claimed its agreement with lenders did not explicitly proscribe movement of funds.

Byju's US-based subsidiary Alpha Inc transferred more than half a billion dollars to Camshaft Capital Fund in 2022, Bloomberg reported, citing a lawsuit in US court.

The investment firm, founded by William C Morton when he was just 23 years old, received the funds despite an apparent lack of formal training in investment.

Since the transfer, luxury cars - a 2023 Ferrari Roma, a 2020 Lamborghini Huracan EVO, and a 2014 Rolls-Royce Wraith - have been registered in Morton's name, according to a lender petition in the court.

Lenders claim the cash was collateral for a $1.2 billion loan and now want control over it as there has been a default in payments.

Byju's, however, said the transaction was fully within the bounds of its credit agreement with lenders, which explicitly does not proscribe or limit the movement or investment of funds disbursed under its terms.

"As a commercially prudent borrower and like any other large corporate treasury, Byju's Alpha has made investments in a multi-hundred billion dollar fund with high security fixed income instruments.

"Our Credit Agreement with the lenders does not prohibit or restrict the movement or investment of monies disbursed thereunder.

"There is no requirement for Byju's to maintain cash as collateral," a company spokesperson said.

Lenders in Miami-Dade County court filings contended that Byju's made significant efforts to obscure the destination of the borrowers' $533 million, purportedly with the intent of impeding and protracting creditors' efforts.

"For the record, the Byju's entities are not parties to the proceedings mentioned in the recent media reports, and have not been served with copies of the complaint or motion.

"This is the first that we are hearing of these proceedings.

"The court filing appears to have been made prior to the latest loan repayment proposal.

"The parties continue to engage in negotiations to settle the dispute, and we remain committed to an amicable outcome," the spokesperson said.

Byju's had in November 2021 raised $1.2 billion term loan from a consortium of US-based creditors.

In June this year, it missed a $40 million interest payment.

Since then, Byju's has been negotiating with its TLB (Term Loan B) lenders to find an amicable resolution.

Earlier this week, it proposed to sell two of its assets - Great Learning and Epic - to repay the loan.

"As a matter of fact, the Delaware court ruling in June this year rejected the lenders' application for information in relation to the amount in question i.e. part of the funds received by Byju's Alpha, the borrowing entity under the TLB," the spokesperson said.